Virus concerns, lower oil prices drag currencies lower
THE Russian rouble, South African rand and Mexican peso led losses across emerging market currencies on Monday, as a new fast-spreading coronavirus strain that shut down much of the United Kingdom roiled risky assets globally.
Britain was shut off from much of Europe after its closest allies cut transport ties, following Prime Minister Boris Johnson’s warning that a highly infectious new strain of the virus was a danger to the country.
Currencies of oil exporters Russia and Mexico dropped nearly 2% against a steady U.S. dollar, as crude prices slumped more than 3% over worries of a slower recovery in fuel demand amid tighter restrictions across Europe.
South Africa’s rand lost 1.6% after a virus strain similar to the one reported in the UK was driving a second wave in the country, prompting some nations to also include South Africa in their travel bans.
“The high beta Russian rouble and South African rand have recorded larger losses overnight as markets scale back exposure to riskier assets,” said Lee Hardman, a currency analyst at MUFG Bank. “The main trigger for the correction lower has been the release of further details about the new strain of COVID that has been detected in England.”
The incoming White House chief of staff said on Sunday that U.S. President-elect Joe Biden’s response to the massive Russian hacking campaign uncovered last week would go beyond sanctions, which further weighed on the rouble.
Central European currencies also fell against the euro, with the Hungarian forint, Polish zloty and Czech crown trading lower between 0.5% and 1.5%.
Turkey’s lira slipped 0.7% after gaining for six consecutive sessions, after data showed that the country’s consumer confidence index remained unchanged from a month earlier as the country re-introduced stricter movement curbs.
MSCI’s basket of emerging market stocks dropped 0.7% as a spike in virus cases and fresh lockdowns fanned fears of more economic pain, offsetting optimism around a fresh U.S. stimulus package.
U.S. congressional leaders reached an agreement on Sunday on a $900 billion package to provide the first new aid in months to an economy and individuals hammered by the surging COVID-19 pandemic.- Thomson Reuters Foundation.